My Thoughts On The Stock Market Collapse

Here are my thoughts about the election vs the stock market and a warning from Robert Shiller – Sign up to Morning Brew for FREE today: http://cen.yt/morningbrewgrahamstephan5 – Add me on Instagram: GPStephan

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Warning from Robert Shiller: Robert says that ‘illness crisis and upcoming election have driven investor fears of a major stock market crash to the highest levels in many years. Yet, while investor confidence in the market is low, stock prices are trading at very high levels.’
https://markets.businessinsider.com/news/stocks/stock-market-outlook-crash-risk-shiller-investor-confidence-high-prices-2020-10-1029721688#

On top of that, Robert Shiller also has what’s known as a VALUATION INDEX…which surveys those same people and asks if they think the market is undervalued, overvalued, or just the right price. And, as we can see from the chart – only 37% of individuals feel the market is undervalued….
https://som.yale.edu/faculty-research-centers/centers-initiatives/international-center-for-finance/data/stock-market-confidence-indices/united-states-stock-market-confidence-indices

That means…according to Robert Shiller…the vast majority of investors feel like a market crash is MORE than 10% likely to happen, during a time where 63% of investors feel the market valuations are high. I mean, it isn’t exactly rocket science here and this doesn’t exactly make any predictions – BUT, it does give us a gauge on MARKET SENTIMENT, which could have a direct impact on where the market MIGHT be headed in the coming few months.

NEXT: Bond Rates Are Rising. This all started the other week when the 10-year-bond prices began to increase pass .8%…for the first time in many months, and the assumption is that – at this rate – the 10-year prices could soon reach that psychological threshold of 1%.

Rates like this are rising with the expectation that – more likely than not – another stimulus is coming, and when that happens, the US will have averted any short term issues that could come up, meaning that long term bonds are able to pay MORE as fewer investors buy them – as we’re seeing here. I know that sounds INCREDIBLY confusing, and I’ve simplified things a LOT…but, when you think of these interest rates, all you need to know is that it’s all about supply and demand.

See, as these bond yields go up – banks need to INCREASE mortgage rates to remain competitive to the investors who buy those loans…therefore, the higher this bond rate goes…the more likely it is that we’ll begin to see interest rates SLOWLY begin to tick back up for mortgages, as well.

Now, it’s still too early to tell FOR SURE what type of impact this is going to have on the housing market, or if this type of rate increase is only going to be minuscule for the time begin…but, either way, the likelihood of mortgage rates dropping any lower than they are today is unlikely.

Overall, though – here’s what YOU need to do about this: FOCUS ON WHAT YOU CAN DIRECTLY CONTROL. Obviously, go out and vote so your voice is heard – that’s an easy one. But, besides that – volatility like this is going to be normal over the next few weeks to months, and it’s up to you to have an understanding of what this means for you, and to make sure you’re diversified enough NOT TO PANIC AND SELL.

And, listen…regardless of what happens, long term, the markets have shown us that they will do just fine long term. This article from Forbes broken down the returns from each president since 1926…and as you can see, the chart always go up, decade over decade.
https://www.forbes.com/sites/kristinmckenna/2020/08/18/heres-how-the-stock-market-has-performed-before-during-and-after-presidential-elections/#4582674f868b

For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com

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